Provost challenges managers to work hard, adapt to change

STANFORD -- To remain a preeminent university, Provost Condoleezza Rice
told an overflow audience of middle and upper managers on Nov. 22 that
Stanford must now focus on downsizing.

"Without change," she said, "we are not going to be the Stanford that we
are now in 10 years. It doesn't take long to decline."

Rice announced several weeks ago that to eliminate a chronic budget
deficit, $18 million to $20 million must be cut from the budget over the next
three years. That comes on the heels of a $22 million cut in 1990, and $43
million in cuts and income enhancement beginning in 1992.

In her first major speech before the staff, Rice said she knows the pain
and the challenge of her request.

"I understand that people are tired and they're weary," she told an
audience of more than 400 at Fairchild Auditorium. "I'm going to ask you if
you will be willing to roll up your sleeves and commit to thinking that
almost no task is really impossible."

Rice told the managers to "have faith in their own resilience and their
own strengths."

She drew on her experience attending segregated schools in Alabama until
the 10th grade.

"You were told in segregated Birmingham that if you ran twice as hard, you
might get half as far," Rice said. "And there were also people who were
willing to run four times as hard so that they could stay abreast. And once
in a while, there was somebody who was willing to run eight times as hard so
they could get ahead.

"We owe it to ourselves and we owe it to Stanford to think that way about
adversity," Stanford's number two officer said. "Not about it crushing us,
but about it giving us an opportunity to work harder.

"Where else would you want to work hard?" she asked.

The political scientist reminded her audience that she went to Washington
as special assistant to President Bush for Soviet affairs in 1989, and on her
watch saw the Berlin Wall come down, Germany unified, Eastern Europe became
liberated and the Soviet Union broken apart.

"They were pretty exciting times," she said to audience smiles at the
understatement. "But I can tell you that I never considered staying. There
was always a draw back to where I had been, and that more than anything for
me speaks volumes about the excitement of Stanford."

Provost knows problems of staff

Rice assured managers that her experience in Washington taught her what it
meant to be "staff."

"It doesn't matter whether you're staff in the White House or staff at
Stanford," Rice said. "There are times when you feel that you have enormous
responsibility and no authority." And there are times the boss - even a
president - "has the greatest idea in the world . . . but it's not workable."

She told the managers that she and university President Gerhard Casper
would not ask them to do the same amount of work with fewer resources -
"that's a recipe for frustration" - but instead be prepared to do some things
differently and stop doing other things.

Rice promised to recognize and support those who "take on the challenge
and in fact do cut costs and deliver outstanding service."

"I know what it's like to think you've been asked to do the impossible
with very few resources," she said. "But I also know the exhilaration of
getting through it."

The provost cannot sit in Building 10 and redesign administrative
processes, Rice said. Rather, she asked staff to work cooperatively across
boundaries, to give up turf consciousness and to be willing to be held
accountable.

"We must reconnect ourselves to the mission of Stanford, to the
excellences of Stanford, to the excitement of Stanford," she said.

Stanford's breadth is unmatched anywhere, she said. This can be something
of a curse, "because it makes it very hard in times of constrained resources
to know where to focus for downsizing."

Discussing the need to simplify university processes, Rice said that flow
charts should show simple lines of authority and accountability, like those
of the nuclear command and control system. Some of Stanford's processes have
charts "that make your eyes spin," she said.

In her speech, she reiterated themes set forth in earlier interviews and
Faculty Senate discussions about Stanford's budget problems:

Stanford is embarking not on another one-time budget- cutting exercise,
but a process of restructuring and re-engineering that will be typical of all
businesses and institutions in the 1990s.

The top priority is to establish long-term fiscal health so "we can once
again think about innovation and investment in our future, not just about
closing deficits year after year after year."

Upcoming cuts will not be across the board. "We really do have to make
decisions about which services we're prepared to give up and which services
we must keep," she said.

Administrative units are being asked to show potential service cuts if
given a budget next year that totals 90 percent or 95 percent of this year's
figures. That exercise is to be repeated for two additional years.

Where there are weaknesses that cannot be fixed, university officers
will consider eliminating them. "We can't afford to have anything mediocre,"
Rice said.

Rosse started the process

Rice paid tribute to former Provost James N. Rosse, who "got out ahead of
the curve with repositioning" in 1990. Rosse knew the long-term forecast of
revenues and expenditures was out of balance, "and he understood it at a time
when it didn't look that way." His program set up the university for managing
in the '90s, Rice said, but was interrupted by the indirect cost problem,
when $43 million in cuts and income enhancement had to be made, most of it in
two years.

The university survived, she said, thanks to faculty and staff who figured
out "how to go after cuts of that magnitude and still keep the university
with a sense of itself and a sense of its mission and moving forward."

Rice reiterated earlier statements that she would consult formally and
informally with faculty, students and staff on possible service cuts.
However, the management structure ultimately is responsible, she said.

Responding to a question about the consequences to managers who take
risks, Rice said she would encourage calculated risks that make sense and
discourage those that do not. Some initiatives inevitably will not turn out,
she said, but the institution must not squelch risk taking.

She said she would prefer to hold off on cuts until the Commission on
Undergraduate Education makes its recommendations, but "frankly, we can't
afford to wait that long."

Evaluating potential cuts

Asked what criteria would be applied to restructuring or eliminating
departments, Rice responded that she is not a central planner.

"As a Soviet specialist, I am probably more aware of the dangers of
central planning than anybody else," she said. "It killed off the Soviet
Union; it could kill off Stanford, too. So you won't see me trying to plan
from Building 10 what our academic future ought to look like."

She suggested that in evaluating programs, deans might ask whether they
still attract top graduate students and whether undergraduates are signing up
for courses. Visiting committees also could be used to analyze programs, she
said.

"Obviously, if you're not attracting graduate students, you're not
teaching undergraduates, you're not doing research and visitors don't think
very much of you, you've got a problem," Rice said.

Regarding disposition of the 1988 report from the University Committee on
Minority Issues, Rice said that "I do not see affirmative action and issues
of multiculturalism as peripheral to what we do, but rather as an integral
part of what we do."

She said that discussions about diversity will be part of academic and
budget planning processes. To the degree that the committee wanted these
issues mainstreamed into academic planning, "it has no stronger supporter
than me."

Affirmative action will get more attention than the notion of
multiculturalism, she said. If the institution concentrates on recruiting a
diverse faculty, student body and staff, then some of the other issues will
take care of themselves, she said.

Asked about budget cuts in formula schools, Rice said she had asked the
Medical School and Graduate School of Business to engage in the spirit of the
process. She said she hoped to see "significant restructuring" in the two
schools.

Van Etten discusses finances

Joining Rice in the lengthy question-and-answer period were Peter Van
Etten, chief financial officer, and Barbara Butterfield, vice president for
faculty and staff services.

Responding to a question about the budget numbers, Van Etten said that
most of the $18 million to $20 million cut would come out of roughly $100
million allocated to central services.

Another $100 million or so of the operating budget is in administrative
services performed in the schools, Van Etten said, and $200 million is in
purely academic expenses. No specific targets were assigned in these
categories, but they have been asked "to restructure themselves to play a
significant role in enabling us to invest in the future."

Discussing indirect cost recovery as an income source, Van Etten warned
that in its desperation to reduce the national deficit, Congress may impose
further restrictions on overhead.

In a later interview, Van Etten said that one idea floating around
Washington is to cap indirect costs at 50 percent. Stanford currently is
operating with a provisional rate of 61 percent.

"I don't think there's any concerted, thoughtful effort driven by public
policy concerns to reduce indirect costs, but the issue gets swept in with
100 other issues as a means to reduce deficits," he said. "In this very
volatile environment, anything could happen."

On deferred maintenance, Van Etten told the managers that past cuts were
well intentioned, but "leave us in a worse position now than before" and
provide a lesson for the future. He said he expects to know the dollar
magnitude of the deferred maintenance problem in two to three months.

"In anticipation of that, we have planned to significantly increase the
amount of money we're spending on deferred maintenance, and that's included
within our budget projections now," Van Etten said.

Butterfield: a professional community

Asked whether Stanford would focus its downsizing on elimination of middle
managers, Butterfield first cited statistics that the university now has the
same ratio of staff to faculty as it had in 1982, down from a high in 1986. A
greater number of nonexempt staff positions was eliminated between 1989 and
1991, then more exempt staff were reduced through 1993, she said.

It would be difficult to justify continuing a structure with "one manager
reporting to one manager reporting to one manager," Butterfield said. Where
staff perform the same kinds of tasks, "one person can typically supervise
anywhere from 20 to 60 people." Fewer would be supervised where tasks are
complex or varied, she said.

On the topic of making employee discipline easier for the university,
Butterfield said that the relationship between the university and employees
is changing. In the past, both colleagues and supervisors have been
"accepting of performance that is not fully supported by the contract that we
have with each other."

This cannot continue long term, she said, because it leads to
deterioration.

Discipline is guided by federal employment guidelines, she said, "but we
can be more precise and we must be more demanding of ourselves and people we
work with."

"We are changing from family to professional community, and that's what we
need to do," she said.

Challenged by a development officer who said she hoped Stanford would not
lose the family and community feeling it promotes among alumni, Butterfield
responded that "we must, everyone of us, act as fully professional, fully
contributing individuals in an interdependent community."

Stanford cannot afford to have "dependents and parents" that are typical
of families, she said.

Asked if Stanford would develop another staff early retirement program,
Butterfield said she did not anticipate it.

"I would like to avoid a continuous brain drain," she said. "We really
need experienced people who are committed to making their careers at
Stanford, so there's a mixed blessing in early retirement windows."

Getting the best out change

Rice concluded the nearly two-hour session saying she hoped change could
be achieved at a& rate that was fast but would not disrupt the "essence of
what we are . . . and doesn't destroy our sense of community and our sense of
belonging to Stanford."

Change can be frightening, she said, but "I hope that this time around
we'll expect the best out of change, and that we'll come out of this period a
stronger and fitter, and still innovative and interesting place. And I hope
that we will do it in a collegial environment."

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